It’s not what you know, it’s who you know that makes all the difference in the discombobulated world of post-crash finance. Sir George Mathewson, the nationalist-leaning former bank chairman, lost millions when his RBS stake was wiped out following the bank’s disastrous takeover of ABN Amro and ill-timed foray into exotic credit derivatives in 2007.
Now the Perthshire knight looks set to recoup some of his losses from a sale of the oil and gas consultancy Wood Mackenzie, of which he is chairman, to Charterhouse Capital Partners.
Mathewson is understood to have acquired an equity stake in the business at the time he took over as chairman from Tom Allison in 2007.
Wood Mac’s current owners, Candover Investments, need to offload it in order to overcome a severe liquidity crisis. This is a hangover from poorly priced and unfortunately timed deals before the credit crisis, including its takeover of bingo and betting group Gala Coral.
Last week Candover was reported to be in talks with fellow private equity house Charterhouse over a £550m sale of the Edinburgh-based consultancy. (Historical note: it was thanks to visionary former leader John Chiene that Wood Mac entered the world of researching North Sea oil and gas companies in 1973 and it has since become one of the most respected consultancies in the world from its base on Queen Street, Edinburgh).
Mathewson knows both Charterhouse and its chief executive J Gordon Bonnyman reasonably well. Alex Salmond’s favourite economic adviser was effectively Bonnyman’s boss in the early 1990s when Charterhouse was owned by RBS and Mathewson was the bank’s chief executive.
Mathewson also has strong links with Goldman Sachs, the investment bank that is handling the sale.
The New York investment bank was one of RBS’s lead advisers during the bank’s go-go years. Giving Bonnyman and Charterhouse their independence in 1993 has arguably turned out to be a shrewd move for Mathewson.
Candover first acquired a 43% stake in Wood Mac in 2005 in a deal that valued the energy consultancy at £150m. It lifted its stake to 67% two years later, sparking a £50m windfall for Wood Mac employees.
The sale comes as Wood Mac is enjoying rapid growth, fuelled by a resurgent oil price and an intensification of demand for reliable information about energy markets. Last year the consultancy’s sales increased from £79.7m to £97m, and profits grew from £28.6m to £38m. London-based Charterhouse is understood to have seen off bids from US rivals including Bain Capital, Hellman & Friedman and Warburg Pincus for the Edinburgh headquartered prize.
Nearly half the estimated £550m price tag will be financed by Wood Mac’s existing lenders — including Lloyds Banking Group — which are apparently willing to roll over £250m of loans.
In a sign of how attractive the asset is deemed to be by the banking fraternity it is also understood that additional banks are jumping on board. Charterhouse is committed to expanding Wood Mackenzie should the deal go through, probably by bolting-on acquisitions of other world class consultancies in further research areas.
This deal is good news for Mathewson, Candover and other Wood Mac shareholders. It also proves that Edinburgh and Scotland are capable of developing world class organisations from scratch.
Out with a whimper
In the end it was not so smart after all. Online bank Intelligent Finance was launched in a blaze of glory in September 2000. At a launch event in London dry ice and Fatboy Slim music pounded out. IF.com — firmly based in Edinburgh Park and led by local hero Jim Spowart — promised to revolutionise banking and claimed in the ads it was “The way all banks will be”.
Nine years later IF.com has gone out with a whimper. In a footnote to its announcement that Cheltenham & Gloucester is for the chop, Lloyds Banking Group said the IF brand was no longer going to be used for new mortgages. This effectively heralds IF.com’s demise and leaves the fate of hundreds of jobs in Fife and West Lothian in the balance.
Given the potential value of the offset market, some observers see this as a strange and potentially anti-competitive move for Lloyds. Perhaps it’s time for Spowart to come riding to the rescue with an MBO offer for the bank that seemed to promise so much.
Sunshine ahead?
Back in 1997 the former Scottish Secretary Michael Forsyth hailed it as Scotland’s biggest inward investment coup.
However, the Hyundai semiconductor plant constructed near Dunfermline turned out to be a white elephant. The plant ended up being mothballed and interim owners Motorola / Freescale never did anything with it either.
Twelve years on from Forsyth’s grandiloquent announcement it looks like the site might finally get a second wind.
Thanks to a £10m regional selective assistance grant, California-based solar energy group Zoom Diversified is poised to sign a deal to occupy the space.
This Scottish Agenda column was published in The Sunday Times on 14 June 2009